Tag Archive: DuPont

For nearly three years, the boardroom maintained a consistent response to a tumultuous marketplace. Whether it was following the 2008-2009 financial crisis, navigating an economic recovery unlike any other, or facing a debt crisis with global implications, reaction from directors seemed to stay the same. Year over year, NACD’s Annual Governance Surveys did not register significant upheavals in methods or structures used. Areas of high priority continue to be strategic planning and oversight, corporate performance and valuation, and risk oversight.

NACD’s Board Confidence Index (BCI), a measure of the boardroom’s attitude toward the state of the economy, told a similar story. Although the index would fluctuate by a few points from quarter to quarter, confidence remained in the slightly optimistic side of uncertain.

This changed last fall when the nation was forced to address the pending fiscal cliff. At November’s NACD Directorship 100 event, DuPont Chairman and CEO Ellen Kullman remarked that uncertainty over future regulatory activity and the general economy had led her company to reevaluate major investments for 2013. Uncertainty in the future of the economy and consumer demand also significantly impacted Coca-Cola’s decisions to make capital investments, according to presiding director James D. Robinson III.

Just a few weeks later, results from the fourth quarter BCI further demonstrated how the economy affected the boardroom. Although the overall index score remained on the positive side of uncertain (51.8), for the first time responding directors indicated outright pessimism in the state of the economy in the next three months. Directors also echoed the statements made at NACD Directorship 100: In preparation for 2013 nearly half (47%) had reassessed corporate strategy.

The need to focus on strategy was also confirmed at NACD’s recently held Master Class in Naples, Florida. Although sessions were designed to address the new and emerging risks entering the boardroom, discussions often returned to the importance of strategic planning in uncertain times. Both panelists and attendees agreed that directors need to keep a steady eye on the established strategic plans at hand.

This recommendation is not without caveat. With a maintained focus, directors should not relegate a discussion on strategy to an annual event. Instead, the established strategic plans should be woven into every board meeting and discussion. Furthermore, plans should be adjusted to incorporate flexibility from the boardroom. This includes shorter response times that are now necessary to address situations that could be presented by emerging methods of communication and rapidly changing technologies.

This morning’s plenary on “Performance Metrics That Make a Difference,” brought together the two co-chairs of the 2010 NACD Blue Ribbon Commission on Performance Metrics, John Dillon and Bill White, as well as NACD Chairman Barbara Hackman Franklin and Jannice Koors from Pearl Meyer & Partners.

When it comes to financial metrics, NACD Chairman Franklin stressed that the board “sometimes… just takes what management gives us.” The board must “make sure that senior management really buys into [the established] strategy, goals, and performance measures,” agreed Jan Koors. It’s important to “trust, but verify,” and for the board to take a more proactive role in overseeing performance metrics.

The panelists agreed that a conversation on performance metrics easily lends itself to a discussion about compensation. However, what boards should be trying to accomplish is a wholesome, deeper dive into all of the various components of the enterprise. Understanding information about your company provides clarity into what can be improved and ultimately perform better.

A lively Q& A session from the crowd of 750 directors at the 2010 NACD Corporate Governance Conference

John Dillon, who serves on boards including Caterpillar and DuPont, emphasized that, while boards currently address performance metrics in proxy statements, the board needs to think more broadly and engage leadership to get an appropriate number of financial and nonfinancial metrics to understand what is going on in the company.

Jan Koors summed it up best when she said “boards do a good job at telling shareholders what the metrics are, but less good at telling why these metrics were chosen and how they relate to strategy and moving the company forward.”